A recent Supreme Court of Delaware case involved the board of directors, and what is necessary to effectuate a valid resignation.

Biolase, Inc.'s Board

The CEO of Biolase, Inc, Federico Pignatelli, thought that Biolase's board needed more experienced directors, so he asked to board members to resign, and re-filled their positions. According to a press release, he was "thrilled" with the new additions to the board -- that is until he learned that the new members had aligned themselves with existing board members on the issue of replacing Pignatelli. Upon learning that, Pignatelli changed course, arguing that the resignations were not valid because they were not in writing.

Writing Not Necessary

The Delaware Court of Chancery held that Delaware Code Section 141(b) was a permissive statute, which did not require a board member to tender his resignation in writing. On expedited appeal, The Supreme Court of Delaware affirmed, stating that "permissive approach that authorizes resignation by the means specified, but not ruling out a resignation by other means, is a sensible and reasonable one." Furthermore, the court found that there was sufficient evidence that the resigning board member did so properly by citing attendance at meetings, and an oral statement.

Advise Your Board

So what does this decision mean for your company? How should you proceed? We suggest giving your board members an update on what is required to tender valid resignations. Though a written statement may not be required, be sure you create a paper trail of sorts documenting any oral statements -- board meeting minutes will play a huge part here. The last thing your company wants is confusion as to who makes up the board.

Giving your board clarification on this issue will ensure smoother and more efficient business dealings.